Prabhudas Lilladher's research report on Cholamandalam Investment and Finance Company
Amidst auto industry slowdown and liquidity tightness, CIFC yet again records superior AUMs at Rs 543bn growing 27% YoY/8% QoQ led by diversified VF product (grew 29% YoY/8% QoQ) and cautious healthy HE lending (strong 16% YoY/4% QoQ). While consolidation times have paved way for proliferation of quality LAP, pacing up of SARFAESI resolutions, increased recoveries (Rs 1bn in HE business) and subsiding balance transfer cases led to best in past 4 years GNPA (2.3% vs 2.8% in Q3FY19 vs. PLe of 2.7%), an all-time low NNPA (of 1.1%) and industry best credit costs (at 0.4% vs PLe at 0.66%). However, PAT was restricted at 2.3% growth YoY to Rs2.92bn [ vs. PLe of Rs3.55bn] due to increased provisions at Rs 556mn as against write-backs a year ago yet lower than our estimates of Rs 824mn, higher than expected interest costs (60bps+ increase in CoF QoQ,36bps YoY), high tax rate (37% vs usual 34%).
We reiterate BUY, reckon CIFC as one of the better placed auto financiers sailing successfully across credit and liquidity cycles with clear execution skills, prudent Management cognizant of portfolio quality and strategic product placement aiding growth and margins. At Sep-21 PABV, we value the company at 3.2x arriving at TP of Rs 1,665 (unchanged).
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